G.R. No. 76931 - Orient Air Services and Hotel Representatives vs. Court of Appeals

General Sales Agency Agreement
On January 15, 1977, American Airlines, Inc. (“American Air”) and Orient Air Services & Hotel Representatives, Inc. (“Orient Air”) executed a General Sales Agency (GSA) Agreement.
Under the GSA, Orient Air was appointed exclusive general sales agent in the Philippines for American Air’s passenger services, with duties including promotion, reservation facilities, distribution of materials, and supervision of sub-agents.
Commissions under the GSA:

Sales agency commission of 7–8% on fares sold on American Air ticket stock.
Overriding commission of 3% on “all sales of transportation” over American Air’s services.

Remittances clause required semi-monthly remittance of ticket proceeds, less commissions, held in trust by Orient Air.
Termination clause allowed American Air to terminate for default or without cause upon 30-day notice; default included failure to remit funds.

Alleged Breach and Termination
On May 11, 1981, American Air alleged Orient Air failed to remit net proceeds of US$254,400.40 for January–March 1981 and, invoking the default clause, unilaterally terminated the GSA.
On May 15, 1981, American Air filed suit in the CFI of Manila for accounting, garnishment, mandatory injunction, and restraining order.

Trial Court Proceedings
Orient Air denied default, counterclaimed for unpaid overriding commissions, exemplary damages (₱1,500,000), and attorney’s fees (₱300,000).
On July 16, 1984, the RTC dismissed American Air’s complaint, held the termination illegal, ordered reinstatement of Orient Air, awarded overriding commissions (US$84,821.31 plus US$8,000 monthly from January 1, 1981), exemplary damages, attorney’s fees, and legal interest.

Appellate Court Proceedings and Consolidation
On January 27, 1986, the Court of Appeals affirmed with modifications: overriding commissions reduced to US$53,491.11 plus US$7,440 monthly, exemplary damages of ₱200,000, attorney’s fees of ₱25,000, 12% interest from July 10, 1981.
On December 17, 1986, the CA denied American Air’s motion for reconsideration and adjusted the exchange-rate basis for commission payments.
Both parties appealed to the Supreme Court; petitions were consolidated under G.R. Nos. 76931 & 76933.

Scope of Overriding Commission
Whether Orient Air’s 3% overriding commission applies to total flown revenue or only to ticketed sales on American Air ticket stock.
Whether the phrase “all sales of transportation … by Orient Air or its sub-agents” limits entitlement to ticketed sales.

Validity of Termination
Whether Orient Air’s retention of proceeds to cover its accrued commissions constituted contractual default.
Whether American Air had lawful cause to terminate the GSA under the default clause.

Compulsory Reinstatement
Whether the courts may compel American Air to reinstate Orient Air as its general sales agent.
Whether such reinstatement violates the principal’s exclusive right to consent in an agency relationship.